Welcome to a brave new world of international tax transparency aimed at netting money launderers and individuals and companies dodging tax by hiding their cash offshore.
David Cameron went to the G8 summit in Northern Ireland with the ink still wet on a signed and sealed tax agreement with all Britain’s offshore financial centres promising to divulge the identity of anyone controlling hidden accounts.
This added weight to his plea for other leaders to follow suit, and he emerged from the summit to herald in a new dawn for international tax co-operation.
All the leading G8 economies – Britain, the USA, Russia, France, Germany, Japan. Italy and Canada – have agreed to share tax information across their borders automatically.
Tax authorities no longer have to make requests supported by evidence of wrongdoing.
From now on, everyone can see tax and financial information held by other nations.
The British side agreement with so-called tax havens was an important negotiating tool for Cameron, who chaired the meeting.
Tiny Crown Dependencies and Territories have punched above their financial weight for decades by spotting and exploiting loopholes in other the tax laws of other countries.
Many have made hosting offshore companies and bank accounts a major industry and employer.
The British havens include the Isle of Man, Guernsey, Jersey, Cayman Islands, British Virgin Islands, Bermuda and Gibraltar.
After some months of wrangling that involved many of their chief ministers being dragged kicking and screaming to tax talks, pressure from the US and Britain finally began to tell.
FATCA led the way
The US Foreign Account Compliance Tax Act (FATCA) has paved the way for the G8 agreement, and the Organisation for Economic Co-Operation and Development has let slip that lawyers are working away behind the scenes to expand the tax network to dozens of other nations.
“This is a global fight and this agreement is the foundation of an international tax tool that will see everyone gets proper tax justice and pays the tax they should,” said Cameron.
From now on, anyone who wants to dodge their taxes has nowhere to hide.”
One of the keys to the tax treaty is an agreement with nations holding shell company registers to open their records to tax authorities who can see for the first time who really owns what and where.
The agreement also lets tax investigators build an international profile of suspected tax dodgers and the true extent of their holdings.